Institutional ownership, capital structure and performance of SMEs in China

Publication Type

Journal Article

Publication Date

11-2023

Abstract

This article examines the relationship between ownership, leverage, and performance for Chinese small and medium enterprises (SMEs). Our study sheds light on how institutional ownership affects the performance of Chinese SMEs. We use agency and the pecking order perspective as background theories for analysing the relationships between institutional ownership, capital structure, and firm performance. We use a range of regression estimations for robustness checks and include Quantile regression, static and dynamic panel regression models, and a two-step system Generalized Method of Moments (GMM) approach to explore data covering 2009–2015. Our findings show that institutional investor’s ownership affects the performance of Chinese SMEs positively and significantly. The negative relationship between leverage and performance indicates the dominance of family ownership in Chinese SMEs, where firms rely more on retained earnings for financing, which aligns with the pecking order theory (POT) perspective. The results also suggest that institutional ownership could mitigate agency issues in Chinese SMEs.

Keywords

Institutional ownership, capital structure, Chinese SMEs, firm performance

Discipline

Asian Studies | Entrepreneurial and Small Business Operations

Publication

South Asian Journal of Macroeconomics and Public Finance

Volume

12

Issue

2

First Page

135

Last Page

159

ISSN

2277-9787

Identifier

10.1177/22779787231196361

Publisher

SAGE Publications

Additional URL

https://doi.org/10.1177/22779787231196361

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